Click / press to view a larger image. premier. Although managed healthcare plans have traditionally not been counted as part of the insurance sector, they are essential in this context. Global demand for health services, including digital health products and services, is blurring traditional industry boundaries.
While we expect a total six-year compound annual growth rate of 3.5 percent, but we do not expect this growth to be evenly distributed. . Emerging markets in Asia and the Pacific drive up the global average. This is most notable in China's large GDP growth.
There is no "rising tide"
Keeping the course is really not an option this time. Nearly half a trillion dollars ($ 480 billion, about 7 percent) of the $ 7.5 trillion in gross premium expected in five years will be severely affected by innovation. We expect $ 200 billion from new risks, $ 140 billion in existing revenue from product innovation and $ 140 billion in offshore investment channels.
With innovation-driven revenue replacing traditional revenue in many product lines, insurers must innovate for both retention and growth. In the meantime, they will need to make scenario-based plans that help build resilience in their strategies.
Profitability is increasingly limited
Even the most innovative insurers will realize the harsh realities of the industry's profitability. Improved pricing in a hardening market is counteracted by increased exposures from new risks and with increasing competition from new market participants. Investment income also remains stubbornly low with non-life insurance and life insurance providers who see book returns averaging 3 percent and 4 percent, respectively.
As a result, we expect the combined conditions to fluctuate around 100 percent and leave insurance profitability flat. Average expenditure ratios are also likely to remain in the high 20s, as average loss-to-earnings ratios rise marginally from the current level in the low 70s (source: Real Estate Accident Forecast and Analysis – 20Q4, Conning).
Concerns about increasing catastrophic risks and increased systemic risks, such as climate change, cyber threats and business disruptions, require more sophisticated risk models and regulation of loss aggregation. The estimated modest single-digit surplus growth must be supplemented by increases in capital reserves (or a reduction in exposure), which further reduces the return on equity.
Given the changing consumer habits and the changed risk. , our new report looks at how insurers can renew themselves for growth and retention over the next five years. differentiated set of products and services and invest in future-ready business functions to support them. Insurers must build offers that provide risk reduction and continuous monitoring to manage and protect against risks. To be able to deliver these new ideas requires real-time collection and monitoring of sensor data and improved data and analysis functions to predict and act on collected data.
Future-prepared insurance companies will have changed the value they offer through intelligent, digitally activated operations and processes. at each point of contact. Insurers who adopt a future-oriented strategy will reconsider how the work is done in different dimensions of technology, processes and people.
To learn more about the measures to be taken to take advantage of new revenue opportunities and retain customers seeking innovative digital offerings, read our report: Insurance revenue landscape 2025: Innovate for Resilience.
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